Investing: Inverse Bond ETFs versus Gold ETFs?

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Nichoman
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Investing: Inverse Bond ETFs versus Gold ETFs?

I've consolidated my IRA's into a USAA Brokerage Account (a very safe...top notch company).

USAA doesn't allow me to buy gold specifically for IRAs.

Questions I have...

1.)  Which is better...investing in inverse bond ETFs (non-leveraged) or gold ETF?

2.)  Should I consider/use both vehicles?

3.)  Suggested ETFs based on your experiences?

4.)  If currency collapse occurs, which vehicle should perform better toward protection of assets.

5.)  Suggested books, web sites to learn more about these (benefits/pitfalls).

 

Inights and experiences would be most helpful since novel in these investment areas. 

Thanks,

 

Nichoman 

 

 

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Re: Investing: Inverse Bond ETFs versus Gold ETFs?

Nichoman,

The IAU works well.

I have an account with USAA, they have many investment vehicles that you may not be familiar with.  Such as options. Which I don't recommend for anyone unless you have been schooled properly.  Point being here, that there is more than one way to make money in a down market than a inverse ETF or ETF.  Just putting the information out there.

I would suggest you look into the basic class found at Achievers Choice Quest  https://www.achieverschoicequest.com/home/tabid/36/Default.aspx  This site is a little hard to navigate.  The basic class 1-5 has more information in one place that actually works than any other I know... It would also answer any question you could have about investing and how to actually protect your investments and make money in any market.

I have also had great success with UDN (inverse to the USD), though I trade the options. 

I know this isn't exactly what you were looking for,but I also know the Achievers Class has all the answers.

Cat

 

 

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Re: Investing: Inverse Bond ETFs versus Gold ETFs?

Hi Nichoman-

    I am no expert at these things, so this is just my opinion.  We recently sold all our GLD etf holdings in our Roth IRAs, out of a growing uneasiness that I felt at holding "paper gold" vs the real thing.  I have read a couple of things that made me concerned that holdings in GLD were potentially vulenerable if TSHTF.  I don't have a good sense of how substantive those concerns are, but I know I felt more comfortable with the idea of physical gold vs a promise of gold being held by someone else, somewhere else. 

   In addition to physical gold, I do have some inverse etfs.  Weiss Research has published some good information about inverse etfs that you might find useful.  First, here is the newsletter that they sent out on inverse etfs.  http://www.moneyandmarkets.com/files/documents/MAM767_Special_Report.pdf .  At the bottom of this newsletter he has a link to a nice table of inverse etfs.  I'll include it here for people's convenience: http://images.moneyandmarkets.com/767/Guide-to-Inverse-ETFs.pdf .  I respect Martin Weiss; he does truly seem concerned about real people, and has been warning about how bad the ratings agencies have been for years.

   One of the thing I liked about Weiss' newsletter is he describes how people could pick inverse etfs to specifically buffer other vulnerable investments in their portfolio that they maybe could not move (e.g., locked in a pension savings plan).  Eg., I bought  EFU, an ulta-short EAFE index to help buffer the EAFE index fund I have locked in my pension fund. 

   There are also some inverse (bear) mutual funds.  I found those useful for my husband's work retirement/investment account, that would not allow us to buy etfs.  We were able to get an inverse mutual fund, DXDDX, Direxion dollar bear, which is 2.5 inverse of US Dollar Index.  The nice thing about this is it provides some buffer against my US Dollar based short term Treasuries in my pension fund.  -I don't like holding dollar based assets, but I can't get them out without quitting my  job, so that was trying to make the best of a bad situation.  

   I hope some of this helps!

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Re: Investing: Inverse Bond ETFs versus Gold ETFs?

I am not an expert either, but my thoughts line up with what pinecarr said.  In my IRA, I have inverse bond funds.  I have physicial gold in a safe place that I have complete control over. 

 It is my understanding that the fundamental problem with IRAs and the like is they are all denominated in USD.  If the USD were to completely collapse, there is nothing you could put into your IRA to protect the value.   Can someone shed more light on this for us?

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Re: Investing: Inverse Bond ETFs versus Gold ETFs?
affert wrote:

 It is my understanding that the fundamental problem with IRAs and the like is they are all denominated in USD.  If the USD were to completely collapse, there is nothing you could put into your IRA to protect the value.   Can someone shed more light on this for us?

Affert - please don't misunderstand the simplicity of my response or think I am being trite.

You don't need any more light shed on the subject - you already have it figured out.  If the dollar goes to zero, your IRA is worthless.  Unless your IRA allows you to purchase gold holdings AND have physical possession instead of certificates of ownership, there isn't anything I can think of that will help preserve the value of your IRA in the event of USD = 0.

 

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Re: Investing: Inverse Bond ETFs versus Gold ETFs?

if USD collapses, your account will no longer exist.  banks will be seized.  IRA/401ks will be seized.  complete martial law will be in place.  any money you thought was safe even in a money market fund will be gone.  even if you have assets denominated in foreign currencies but it's done through a US institution, that will probably disappear from your account as well (for those Peter Schiff fans...he's awesome, but doing it through a US institution doesn't protect you from the crash).

the only haven in such a situation is having gold offshore and some cash in a swiss canton bank.

having said that, complete collapse is a long way off.  the world is going to continue in this cycle for a while of believing the USD is the safe haven.  the IRS has proven to be the most effective institution of highway robbery in history...350,000,000 people willingly fork over 30-50% of their income to it.  that's why the world believes US treasury debt is safe...our government forces us to pay the interest on it!!  so not until most of those 350,000,000 sheep wake the heck up and show signs of rebelling will the world turn from US debt and, therefore, cause the dollar to collapse.   

given that won't happen for a long time, I'd personally put the cash in short-term treasuries like Weiss recommends.  if you want to play trends, my personal opinion is that US bonds are on a short-term rally back to their Dec high, and I think gold is going down to 600-700 in the short term.  once it reaches that level, I'd reverse both of those positions...short bonds and go long gold (some of which should be in offshore physical vaults...Perth Mint or the safewealth group in Switz.

 

 

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Re: Investing: Inverse Bond ETFs versus Gold ETFs?

I think they are two similar plays that dont correlate 100% in movement, so it is a way to "diversify" your holdings.  Proceed with caution, downsides tend to hit faster than upsides, and you can never get out of the casino with your money fast enough if bad news (good?) hits. 

 

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Re: Investing: Inverse Bond ETFs versus Gold ETFs?

Its like taking candy from a Bernake!

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Re: Investing: Inverse Bond ETFs versus Gold ETFs?

All...

 

Thanks for the good information and suggestions.   Lots to consider...especially with what's been happening (ironically past 24+ hrs).

As in most things in life, personal tradeoffs and priorities govern.

Key assumption making

1.)  Gold ETF's...will be able to monitor...if/when...need to move to other vehicles.

2.)  There will always be other options (as necessary)...key is timely judgement...personal experiences in multiple disasters (Mt Pinatubo, Mt St Helens, DESERT STORM, etc.)

What i'm saying..."I trust myself" to do the right thing at the right time...to borrow from Chris Martenson.

Major movements to Gold ETF's has been my latest major IRA investment choice.

Still trying to learn and do more research...all ideas welcome!

Thanks Again,

 

Nichoman

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Re: Investing: Inverse Bond ETFs versus Gold ETFs?

Nichoman -

Consider learning how to trade in a down market. There is no shortage of material that teaches you the fundamentals behind Put and Call option trading, among other techniques that work in any market environment.

Then you can be completely market neutral and trade - even in a downward move. Use the profits to eliminate your debt and make the necessary changes to take care of your family and friends. Once that's done, put some aside for yourself and buy gold, silver, bullets, beans, or whatever you think will be good barter.

Then give the rest away in a way that will have a positive influence on the lives of others.

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Re: Investing: Inverse Bond ETFs versus Gold ETFs?
Dogs_In_A_Pile wrote:

Nichoman -

Consider learning how to trade in a down market. There is no shortage of material that teaches you the fundamentals behind Put and Call option trading, among other techniques that work in any market environment.

Then you can be completely market neutral and trade - even in a downward move. Use the profits to eliminate your debt and make the necessary changes to take care of your family and friends. Once that's done, put some aside for yourself and buy gold, silver, bullets, beans, or whatever you think will be good barter. Then give the rest away in a way that will have a positive influence on the lives of others.

Can you suggest any books and/or specific techniques?

I do have the book "Options As A Stretegic Investment" by McMillan

Have only used options a couple of times though...last time roughly two decades ago.

 

Nichoman 

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Re: Investing: Inverse Bond ETFs versus Gold ETFs?

Dont forget OIL, that's valueable too, ya know!

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Re: Investing: Inverse Bond ETFs versus Gold ETFs?
Nichoman wrote:

Can you suggest any books and/or specific techniques?

I do have the book "Options As A Stretegic Investment" by McMillan

Have only used options a couple of times though...last time roughly two decades ago.

Nichoman 

Nichoman -

Send me an email and we can take the discussion off-line.  I don't want to hijack the thread telling what we have done with our trading strategies.

 

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Re: Investing: Inverse Bond ETFs versus Gold ETFs?
Dogs_In_A_Pile wrote:
affert wrote:

It is my understanding that the fundamental problem with IRAs and the like is they are all denominated in USD.  If the USD were to completely collapse, there is nothing you could put into your IRA to protect the value.   Can someone shed more light on this for us?

Affert - please don't misunderstand the simplicity of my response or think I am being trite.

You don't need any more light shed on the subject - you already have it figured out.  If the dollar goes to zero, your IRA is worthless.  Unless your IRA allows you to purchase gold holdings AND have physical possession instead of certificates of ownership, there isn't anything I can think of that will help preserve the value of your IRA in the event of USD = 0.

 

Good, thanks for the reassurance.  I learn best by asking questions, so I sometimes risk asking obvious questions to make sure I'm understanding stuff.

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Re: Investing: Inverse Bond ETFs versus Gold ETFs?

Honestly for those with limited trading experience I am not so sure that trading riskier investments is a good idea.  Its one thing to watch your savings blow up, its another to cause it yourself.  For sure, its a period of dammed if you do dammed if you dont.  As CM says, money is a store of future labor, so unless people get zapped in mass quantities, its unlikely the USD will go to 0, even if its mathematically correct.  Conservatively a good goal might be to just try to maintain the same buying power relative to the value of the currency.  Be prudent.  Good luck.

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Re: Investing: Inverse Bond ETFs versus Gold ETFs?
plantguy90 wrote:

Honestly for those with limited trading experience I am not so sure that trading riskier investments is a good idea.  Its one thing to watch your savings blow up, its another to cause it yourself.  For sure, its a period of dammed if you do dammed if you dont.  As CM says, money is a store of future labor, so unless people get zapped in mass quantities, its unlikely the USD will go to 0, even if its mathematically correct.  Conservatively a good goal might be to just try to maintain the same buying power relative to the value of the currency.  Be prudent.  Good luck.

 

Plantguy -

This may be semantics, but you don't "trade" investments.  I think it is important to understand and make a distinction between the two.  You trade to generate funding to purchase investment holdings.

Hypothetically speaking, as Enron was melting down, it was a great trading stock.  Buying and selling Put option contracts was a great source of revenue to hold and purchase good, stable, boring companies.

You trade volatile stocks to take advantage of the stock price movement.  You invest in companies that are boring, solid, well run - although several of the recent failures probably fit into this definition.  Think General Electric, Coca Cola, any railroad.  They just don't move that much.  If you can go to bed at night with your entire net worth in a company and you don't lose any sleep, that company probably meets the definition of boring and well established.  But bear in mind that the landscape does change and a company that was boring today may now become very volatile.  The converse can also happen - think back to when Dell and Microsoft were moving tens of points per day.  Now they are mature companies.

I also think "risky" trading is a buzz word.  There is no such thing as risky trading or investing if you do so with a honed and focused discipline.  Here's what I mean - let's say you buy 10 in the money call option contracts of Google.  You did so expecting the price of Google (and hence your option value) to rise.  For whatever reason, the price chops sideways for a day or two and then starts to slide.  You must close the position and take the loss while it is small.  Forget about trying to "recover" your small loss - you just mentally changed your trade strategy to suit your desire, not what you knew.  You got into the trade expecting it to go your direction.  When it doesn't go your way you close the position.  No discussion, no debate, no emotion.

Nobody should enter a trade expecting the price to go one way or the other and stick around as it starts to back up over them. 

Risky trading is only risky when you the trader assumes risk because of a breach of discipline.  Getting out of a trade that is backing up over you with a small loss makes your actions an outstanding trade.  If you do what is correct for the situation, then it is still a good trade - just not a profitable one.  The people that "manage" a losing trade back to a profitable position aren't good traders - they are lucky, undisciplined traders.  Eventually that lack of discipline will wipe them out.

And luck has nothing to do with trading successfully - IF you do so with a focused, deliberate and disciplined approach.  If you do that, you manufacture your own "luck".  Even then, I wouldn't call it luck.  I'd call it trading according to the rule set you established for yourself.  Luck only comes into play when someone doesn't trade the way they are supposed to and somehow manage to come out on the profitable end.

You don't build wealth through trading by maximizing profits - you build wealth through trading by minimiziing your losses.  And once you have your account to the point where your financial needs and the needs of your family are secure - then it's time to start taking care of other deserving people.  Build a school on a native American reservation.  Build wells in impoverished sub-Saharan communities.  Build a church.  Build whatever you want that will have a positive impact on the lives of others.

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Re: Investing: Inverse Bond ETFs versus Gold ETFs?

Dogs, 

I respect you, but are you are touting your option strategies as sound?  Do you stop-loss all of your positions?  Care to say where?  10%? 15% 20%?  Depends?  In a volatile market, its possible to get stopped out of positions and miss out, right?  Are you that disciplined that you dont mind the stops, and you jump right back into a position you favor?  And you dont sweat the transaction fees? 

I was a Registered Representative (stockbroker) 20 years ago at a large full service firm.  Granted I only lasted in the trenches about 4 years, but it was my first job out of college and I got there bacause its all I wanted to do and I had prepared myself extensively during college with work-related experience.

I know all about puts and calls, straddles and spreads, writing covered and naked stuff.  I used to love trading options, though I tended to favor the fixed income side of the business.  I have sold CMO's to little old ladies, as well as high yield (junk bonds), municipals, the whole gamut.  Thats one advantage of being a plain old stockbroker as opposed to a trader at a firm.  I use the term trade because that's the language I learned. 

I took my fiduciary responsibility seriously, which is why I couldn't stomach the business.   Nichoman doesn't sound to me like he's got much time being an active trader or taking aggressive positions.  For Pete's sake he is talking about his Individual Retirement Account.  I have to differ with you about wanting to show him the casino side of the business without offering a bit of caution.  I understand this current market seems one-sided to some, I'm all over it too, but to claim you have some edge or angle that's completely mitigated risk is irresponsible.   Markets sometimes stop trading, and positions can re-open with much different prices.   

 

 

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Re: Investing: Inverse Bond ETFs versus Gold ETFs?

Good Morning Plant -

All good and reasonable questions so I'll do my best to answer.

It's not the strategies themselves that are sound but the discipline to correctly employ those strategies that is and developing that discipline is the hardest part.  What I do have is an education in my trading techniques that is vastly different from anything you received.  Nowhere did I claim to have an "edge" or "angle".  What I claimed to have is education in some basic trading techniques and knife edge keen discipline to apply those techniques and follow those rules explicitly.  That knife edge was honed in nearly 1500 hours of formal classroom instruction and countless hours of practice trading without real money.  My wife and I did practice trades for a year before we put a nickel into a real trade. There is nothing "Casino" about what I do.  That discipline is what mitigates "risk", not any charting parameter or trading technique.  And "caution" was implicit throughout my post.  The material and techniques are easy - developing the discipline to use them, and to follow the rules associated with them 100% of the time is among the most difficult things I have ever done.  Risk will always be there and you will lose money even with discipline - but as I said in my earlier post, what you will experience by trading with discipline is minimization of any loss.

I NEVER stop loss when trading my positions, so No, I never "miss out".  I have a ZERO loss tolerance - if my position doesn't go the way I expected it, I am gone.  I love the 10 or 15% loss argument.  Especially when people tell me they have a 10% loss target and are staying in a trade because it's only down 7%.  They know the position isn't working yet they are sticking around until they lose more money in the trade?  How stupid and undisciplined is that?  When I get into a trade, the nanasecond after I get the confirmation message, I am looking for a reason to exit.  It may be a dollar movement amount, it may be an event (like an earning release or FOMC meeting or Beige Book announcement - all of those have the potential to move the markets and the underlying position).  I take a chunk of the move, close with a profit and move on.  If I see a potential movement of 5 or 6 dollars, I take 3 or 4 and go on.  I never "miss out" - and I don't look back at a trade that I got out of to see how much more I would or could have made.  Fear and greed drive the market and they make you blind to discipline.  Fear keeps you out of good trades, greed keeps you in bad trades - trades that have already run their course - but someone feels the need to stick around for the last nickel.

The very language and tone of your post tells me that you and I don't think about and view the market the same (not a critical comment, just an observation so bear with me)

I don't jump right back into a position that I "favor" because I don't favor anything.  If I got out of a trade that wasn't working, then the trade is over, regardless of whether or not it is moving in the direction I originally felt it was supposed to.  The process to find another or new entry point starts all over again.  It isn't a missed opportunity and I don't get excited.  Do you get pissed off when you miss an elevator or do you realize that another car is going to come along soonand wait for that one?  That's my mind set when looking for a trade entry point - I may "miss" a very profitable trade on Google because I was watching something else, but I don't care.  Another trade will be coming.  Trust me that Google will be watched for future trade oportunities, but that is about as long as I will dwell on that Google trade.

And no, we don't sweat transaction fees - 8 bucks in, 8 bucks out for an equity trade up to 10,000 shares, $10.70 for an option trade up to 10 contracts, add $1.25 per contract up to 50.  Kind of hard to get excited over a $21.40 fee coming off of a trade with a 30-80% profit.

And the real beauty is we make no more than 10 trades per month, more often than not, half that.

Specifically addressing the halted market - if I am in a call position on a stock that is halted then I am mentally prepared that it is going to be a 100% loss.  If I am in Puts then I am likely going to throw a party - my experience has been that a stock is not halted for good news.

After 7 years of instruction, I have heard every excuse for why someone can't "do this".  None of them are valid - there were 90 year old men and women in the class who did it.  There were 14 year old kids who did it.  Nobody cares about your money except you and if you think otherwise then you should continue to let people manage it who don't know how to make money for you.  Brokers get paid based on how much client money they have under management - not how much money they make for their clients - at least mine did and that's why I fired them all. 

I would suggest getting and reading the book "No Excuses" by Kyle Maynard - then come back and tell me what your excuse is for not being able to do something.  (Not you personally, 'you' in the collective anybody sense)

If you are still reading, please don't take these next few comments as a personal attack - they are merely what I have observed in the last 8 years of actively trading - and it is in that context they are framed.  You said you "know all about puts and calls, straddles and spreads, writing covered and naked stuff." but did you actively do them?  Knowing about something and actually doing it are vastly different.  Here's an observation:  Straddles and spread are for people who aren't sure which way the trade is going to go so they cover both sides and hope they can close the incorrect position fast enough to let the correct position profit.  That is not trading, that is guessing. 

"I used to love trading options, though I tended to favor the fixed income side of the business."  That presumes a green market and doesn't allow one to take advantage of downward moves.

And a final personal opinion - if professional brokers truly knew how to make money, why would they have a job as a professional broker in the first place?  Unless they have reached Maslow's highest level and are doing it for the betterment of all - and recent news events would lead one to conclude that there aren't too many Maslow Level 5 brokers out there.

I appreciate your questions and comments.

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Re: Investing: Inverse Bond ETFs versus Gold ETFs?

Hey, good morning to you.  Nope not offended one bit by your last reply; just curious about your discipline, as in study.  I agree there are those who apply themselves and can make more successful trades than not.  Hopefully I am one of them, and you too :) !

To answer the collateral questions?  Why did I become a broker?  I dunno, as a young person I was absolutely fascinated with Wall St and its tycoons (greed?).  But my background as a total outsider and middle class roots precluded me from knowing what it was really like.  I would have done anything there, of course Corporate Finance had the "higher status" end of the business, but had no idea how to get in that side.  I did not have the academic credentials to get in through the front door; so I thought the best strategy for me was to get in through any open window, as in take part time jobs with Wall St. firms.  I also lived in Los Angeles, which is a bit far from NYC, so my choices were limited.  Got lucky; I wasa peon at the Bear (stearns, co), worked at the infamous Drexel Burnham Lambert too, actually have one antecdote of Michael Milken sayng hi to me in the hallway, pretty heady stuff for a 20 year old who knew nothing.  That was my Forest Gumpy intro to Wall St.  I leveraged my college jobs into a broker positon, a lowly foot soldier in the big picture, it was my only option.   Business is SALES driven, secondary market speculation has very little to drive the true profits on Wall St.  I still am fascinated by fixed income, I still learn something every day about the credit markets.  How one lever can have so many angles of analysis has always boggled my mind.

Do we view the market the same?  As a place to make money, yes.  Is it possible we are viewing different facets of a beautiful diamond? probably.  My strategy has to fit my lifestyle; I dont (get to) sit in front of the screen all day, I have a business to run outdoors, I have limited windows of opportunity to check in, and have to decide accordingly.  Do I use stop losses? nah.  I agree that firm discipline and being emotionless about trades is a ingredient to success.  Also viewing it as money management, and being keenly aware of your allocations are important too.  I have not read up your strategy, don't think I would have the time, and I wish you much success.  It sounds allright to me.  I was trying to get a feel for what you do when I tossed out spreads, straddles, etc.  As you say its your money, only you are the master of its destiny.  I dont remember the old books written by other successful traders, they always tell you its about your loss adversion first and foremost.  This market is now rigged like I have never seen before, once you see that there are opportunities. 

Back to the newbies, I stand my ground that most people havent practiced, paper or real enough to play.  Excuse my flippant language, too many concerts. :)  Sure you dont have 7 more years to practice befoe the picture changes again, but you know it takes something really deep down inside to do this without making mistakes.  I just wanted to warn the uninitiated and undisciplined its not a free road, mistakes cost real money.

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Re: Investing: Inverse Bond ETFs versus Gold ETFs?

Plant -

Fair enough - great post.  I take issue with your "too many concerts" comment - there is no such thing.  It's aboout the only sanity I can find these days.  Going to Richmond in a few weeks to catch Railroad Earth at the National.

I am in 100% agreement with you regarding the uninitiated and undisciplined - market makers eat them alive.  There is so much I didn't discuss wrt how we trade and what we learned - not unless I completely hijack the thread topic.  So.....................

"Attention in the cabin, there is a mini-hijacking in place that we expect will be over soon.  Drinks and snacks will be served and as always, exact change is greatly appreciated."

One of the things we have experienced over the last 7 plus years of trading is the other people we have met who took the same course of study.  IMO, academic credentials are a myth, an industry erected roadblock that has nothing to do with how well you  employ the techniques.  Anecdotally, the less "educated" (however that is measured) are better at this than the so called educated because they don't have a bunch of ancillary hoo hah floating around in their heads.  They just do what is taught, exactly as taught with the acquired discipline.  Kids are even better than adults - they understand the consequence of breaking rules - i.e., a spanking, and when you consider the potential "spanking" the market can give you, well they want no part of that.  It's only the learned adults who see the need to prove how tough they are by getting spanked.  We have been in 100% loss trades because we violated trading rules and it's no fun - especially when you look in the mirror at the bonehead responsible for it.

For what it's worth, the guy who developed and taught the seminars was a high school educated tire builder.  No college diploma but a work ethic and drive to succeed rarely seen.  And he makes it clear from the get go that it is not a "get rich quick" thing, but a work thing.  He also makes it very clear that in his 10 plus years of teaching the seminar, 80% of the people who take the course, quit.  He frankly doesn't care about the quitters - his focus is getting the information to the 20% who actually work at it.  And I can tell you from personal experience they are a great group of people to know.  We got to know a lot of people through the course and many are now very close friends. 

As far as time - there is plenty of time.  As you know the market generally (until recently) has done about the same thing, year over year, at the same time of the year - generally up from fall into Christmas, choppy in the summers, spring low retested in summer, etc.  A year of paper trading exposes you to those cycles - a key element is the transition period between the cycles - for example, trades getting longer or shorter in duration.  After a year of practice trading, you tiptoe in, not all in.  Our first trade was $400 (Brocade and it returned 38% in three days).

We aren't hostage to the charts and the computer all day either.  Mrs. Dogs does 99.99% of our trading, and she spends maybe a half an hour in the evening screening potential trades.  We look for events that historically move the stock price (earnings, splits) to get an expectation for movement in that direction.  When technical indicators line up with the expected move AND an entry is there, the likelihood of a successful trade is very high.  If it backs up on you - GET OUT!!  Take the small loss and move along.  Over time, small losses are more than overcome by profitable trades, but the focus MUST be on developing the discipline to leave a trade that is going against you, not being focused on finding the lottery trade that makes you Warren Buffett overnight.

The techniques work in any market environment and as the market changes, different techniques will be brought to bear.  I haven't done a splits based trade in forever.  I can't remember the last time I did a trade on an IPO.  But in truth, the markets don't really change all that much.  the same underlying principles move them the same way today as they did in 1909.  "Markets In Motion" by Ned Davis is a great book that allows you to see how the market has pretty much done the same thing (albeit at different levels) year over year going back over 100 years.

The bottom line is this, anyone who wants to do it can.  Whether or not you do do it comes down to the simple question of whether or not you have the drive and discipline to do so.

I plugged it earlier, I'll do it again in case it was buried - I highly recommend you read "No Excuses" by Kyle Maynard.  That should give you pause to consider the next time you think something is "too tough".  I like to run half marathons (because I am dumb) and I hit a mini wall at about 7 miles almost every time - then I think about Kyle Maynard's book and I get pissed at myself for even thinking about quitting. 

gregroberts's picture
gregroberts
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Re: Investing: Inverse Bond ETFs versus Gold ETFs?

To all, thanks for the info, I'm posting here so I will have it in "my posts" to refer back to when I have more time.

Greg

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cat233
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Re: Investing: Inverse Bond ETFs versus Gold ETFs?

I see something my husband, Dogs (maybe I should call him Mr. Cat... He always calls me Mrs. Dogs and I'm a cat, I don't get it).... Anyway, he left something out.

Trading 101 ... You need to have the discipline to DO what the market is doing and not what you think it should be doing.  Also, take what the market gives you, if that isn't what you thought it should be, doesn't matter, take it and leave.

I did that just this morning, I had a GTC in for X, it was a dime away from X and the market stated to turn. I changed my order, took what the market was paying (my brick), and threw the brick on the pile.  Now waiting for the market to tell me what to do next.  Patience will make you a fortune.  That fortune is made one brick at a time and not all in one day.

Cat... Mrs. Dogs... Whatever my name is.

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plantguy90
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Re: Investing: Inverse Bond ETFs versus Gold ETFs?

A quickie about IPO's, if you'aren't real high up the food chain with your broker, dont do it, you will get the garbage and it invariably gets cheaper in the secondary market.  Its a flipping game, and the hot ones dont come by too often, and even then its just a stampeding herd of money managers and hedge funds fighting for the 1st buy.anyways.

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Dogs_In_A_Pile
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Re: Investing: Inverse Bond ETFs versus Gold ETFs?

I hope Mrs. Dogs keeps Mr. Cat around for a long time.

Plantguy - great point about IPOs.  I should have been clearer - we would watch for IPOs and trade the retrace after the initial euphoria of buying something new had run its course.  Typical response was a spike and then a fade - the fade was usually good for a couple of points.

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plantguy90
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Re: Investing: Inverse Bond ETFs versus Gold ETFs?

Dogs,

Just a quick question; what are the premiums like on puts nowadays?

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cat233
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Posts: 575
Re: Investing: Inverse Bond ETFs versus Gold ETFs?

Plantguy90...

That would depend on the intrinsic value and the time value...The greater the stock price, the greater the option price. The more volatile the stock, the greater the price.  The more time, the greater the cost, but it is always the wise thing to do... Buy as much time as you can afford.... One doesn't want to fight time decay.  I have paid as little a dime a contract to as much as $50/contract.

Cat

 

 

 

 

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Dogs_In_A_Pile
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Re: Investing: Inverse Bond ETFs versus Gold ETFs?

plantguy -

Yeah - what Cat said.

It depends is the short answer.  The job of a market maker is to create fluidity in the market (second to separating people from their money).  He does this by managing the spread between the bid and ask price for an option - or a stock for that matter. 

Fast moving, high priced stocks have larger spreads than slower, less volatile stocks.  I have seen 10 dollar spreads between bid and ask prices on Google options.  On more thinly traded or less volatile stocks, the spread may be as low as 20 cents.

Cat hit the time element piece and I think that is the most critical part to understand.  You can buy in the money (currently trading around $82.96 so $85 is the first in the money put strike price) Puts on Goldman Sachs expiring in March for $9.15 and sell them for $9.20.

This breaks down as follows:  $85 - $82.96 = $2.04 real or intrinsic value.  $9.15 - $2.04 = $7.11 of time value.  About what you'd expect given the current climate in the financial sector.

As far as buying time on the option here's a great illustration.  The same $85 strike price put options expiring in October are going for Bid $22.45 and ask $22.65.

In this case you still have $2.04 in real value but by buying 8 months out in time in October, you have over $20 of time value associated with the option for the same strike price.

This is where the market maker can screw with you.  If he inflates the options out in time, you can get fairly significant price movement with little accompanying movement in the option price.  We have been in trades where there was a $7 move in the stock price and the option price didn't move.  We have also been in trades where the stock price was flat to down for the day and the option price when up.

And for those reading this post who aren't familiar with options - Call options increase in value as the underlying stock price rises.  Put options increase in value as the stock price falls.

The keys with options trading IMO are as follows:

Buy at or in the money

Buy as much time as possible (October vs. March given the above example) 

Sell the option while it is still going in the direction you thought it would - it's much easier to get out as the price is still rising over trying to sell once it has turned and the option value is falling.  That's when the market maker gets nasty - you may have a sell order in to sell 20 contracts at $8.  The market maker may fill 4 at $8 and then drop the price to $7.80 hoping you will follow.

I hate it when they do that.............. 

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mike009
Status: Member (Offline)
Joined: Dec 11 2009
Posts: 8
Re: Investing: Inverse Bond ETFs versus Gold ETFs?

Hi

I was given your name by another member< i think it was AO> 

I was also interested in investing methods

Would you be able to help off  of Chrismartenson's site?

thanks 

Mike 

[email protected]

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